Kathmandu a rare highlight as minnows suffer

It might be just over halfway through the second quarter of the 2012 financial year, but already companies at the smaller end of the S&P/ASX Small Industrials Index are setting records for the wrong reasons.

Nine stocks hit their lowest point since around June 2009, two of which slipped to record lows. By comparison, only retail favourite
Kathmandu Holdings
managed to post a record high during the same period.

Sales for the outdoor retailing chain are up more than 16 per cent, at $NZ56 million ($42.46 million), in the 15 weeks since its new financial year began in August, while same-store sales rose 7.6 per cent.

That compares to growth of about 2.1 per cent over the same period last financial year and is a good counter-argument to concerns about the risk of cannibalism increasing as the company progresses its store roll-out program.

But for rural services company
Elders
, and timber and pulp mill operator
Gunns
, it is their exposure to managed investment scheme forestry assets which has raised the ire of investors this year.

The share price of both companies fell to record lows this quarter, with Gunns still awaiting final settlement on the expected $107 million sale of its Green Triangle forestry assets. UK-based sustainable plantations company New Forests is rumoured as a potential buyer.

Elders stock continued its downward spiral after the company reported a full-year loss of more than $395 million on Monday, including a $390 million write-down for its failed forestry business exposure this week.

While Gunns remains firmly focused on ensuring financing for its $2.3 billion pulp mill is confirmed so construction can begin, as planned, in March, two actions in the Tasmanian Supreme Court are underway seeking to prevent the company building the mill in the Tamar Valley. However market watchers are sceptical either will be successful.

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Shares in the company, which is trading on a forward earnings multiple of more than 18 times, are down about 68 per cent since December 31.

Anti-infective drug development company
Biota Holdings
, directed towards research and development of influenza, human rhinovirus [HRV] and multi-drug resistant bacteria, confirmed there were no sales of its second generation influenza antiviral Invair during the September quarter, with its shares subsequently slipping to a 31-month low.

Biota reported a net loss for the full year to June 2011 of $28.1 million compared to a net profit of $16.2 million in the 2010 fiscal year, but management said the drop was expected as Relenza royalties slowed following a strong sales period during the swine flu pandemic.

However the company’s $70 million cash balance should be sufficient to fund operations for more than two years and management have indicated the cash burn of $34.4 million during FY11 was atypical and related to funding of the Phase III trial for its HRV drug.

Shares in the $130 million pharmaceutical company jumped 45 per cent in early April after management confirmed it had signed a $231 million contract with the US Office of Biomedical Advanced Research and Development Authority for a five-year program to develop its laninamivir flu treatment.

However its stock has nearly halved in value since then, trading at 72.5¢.